NOTE G

PREMISES AND EQUIPMENT

A summary of premises and equipment follows (in thousands):



|                                          |   | December 31,
|----------------------------------------- | - | ------------
|                                          |   | 2000        
|Land                                      | $ | 781         
|Buildings and Improvements                |   | 2,071       
|Furniture, Fixture and Equipment          |   | 526         
|                                          |   | ------      
|                                          |   | 3,378       
|Accumulated Depreciation and Amortization |   | (851)       
|                                          |   | ------      
|                                          | $ | 2,527       
|                                          |   | ====        



Depreciation expense for the years ended December 31, 2000,
1999 and 1998 was approximately $137,000, $112,000 and $123,000,
respectively.

NOTE H

FORECLOSED REAL ESTATE

A summary of the activity of the Foreclosed Real Estate account
follows:



|                                                     |   | December 31,
|---------------------------------------------------- | - | ------------
|                                                     |   | 2000        
|Balance - Beginning of the Year                      | $ | 14          
|Acquired in Settlement of Loans                      |   | 109         
|Costs Capitalized                                    |   | 8           
|Sales of Foreclosed Real Estate                      |   | (14)        
|Less: Allowance for Losses on Foreclosed Real Estate |   | -           
|                                                     |   | ------      
|                                                     | $ | 117         
|                                                     |   | ====        

Expenses applicable to foreclosed real estate consists of operating
expenses, net of rental income, and gains and losses on sales
of real estate. The Company incurred net expenses associated with
foreclosed real estate of approximately $2,000 for the year ended
December 31, 2000. For the years ended December 31, 1999 and 1998,
the Company recognized net income associated with foreclosed real
estate of approximately $24,000 and $1,000, respectively.





NOTE I

REAL ESTATE HELD-FOR-INVESTMENT

Real estate held-for-investment consists of a former branch
location as summarized below (in thousands):



|                           |   | December 31,
|-------------------------- | - | ------------
|                           |   | 2000        
|Land                       | $ | 211         
|Buildings and Improvements |   | -           
|                           |   | ------      
|                           |   | 211         
|Accumulated Depreciation   |   | -           
|                           |   | ------      
|                           | $ | 211         
|                           |   | ====        

Depreciation expense for each of the years ended December 31,
2000, 1999 and 1998 was $2,000, $3,000 and $1,000, respectively.

During 2000, the Company transferred the remaining book value
of the building to land. The Company plans to redevelop this property
in 2001, and all existing structures are to be demolished.

The Company leased this property on a month-to-month basis
for $1,600 per month. The lease was terminated in March, 1999.
Total rental income recognized was approximately $1,700 and $20,000
for the years ended December 31, 1999 and 1998, respectively.

On February 20, 1998, in response to regulatory considerations,
the Company purchased from the Association a former branch location
and adjoining property for $453,000. The purchase price was based
on the appraised value of the property at the time of the transaction.
This inter-company transaction resulted in a gain to the Association
of approximately $178,000, which is eliminated for the purposes
of these consolidated financial statements.





NOTE J

DEPOSITS

Deposit account balances at December 31, 2000 and 1999 are
summarized as follows:



|                              | Weighted
    Average Rate at |      |      | Year Ended
    December 31, |  
|----------------------------- | ---------------------------- | ---- | ---- | --------------------------- | -
|                              | December 31,                 |      |      | 2000                        |  
|                              | 2000                         |      | 1999 |                             |  
|Balance by Interest Rate:     |                              |      |      |                             |  
|Demand Deposit                |                              |      |      |                             |  
|                              | Accounts                     | 4.64 | %    | N/A                         | %
|Regular Savings               |                              |      |      |                             |  
|                              | Accounts                     | 3.00 | %    | 3.00                        | %
|Certificates of               |                              |      |      |                             |  
|                              | Deposit                      | 5.85 | %    | 5.00                        | %
|                              |                              |      |      |                             |  
|                              |                              |      |      |                             |  
|                              |                              |      |      |                             |  
|Certificate Accounts Maturing |                              |      |      |                             |  
|                              | Under 12 months              |      |      |                             | $
|                              | 12 months to 24 months       |      |      |                             |  
|                              | 24 months to 36 months       |      |      |                             |  
|                              | 36 months to 48 months       |      |      |                             |  
|                              | 48 months to 60 months       |      |      |                             |  
|                              |                              |      |      |                             |  
|                              |                              |      |      |                             |  
|                              |                              |      |      |                             |  

The aggregate amount of deposits with a minimum balance
of $100,000 was approximately $3,928,000 and $1,497,000 at December
31, 2000 and 1999, respectively.



Interest expense for each of the following periods is as follows
(in thousands):





|                 |   | Years EndedDecember 31,
|---------------- | - | -----------------------
|                 |   | 2000                   
|Certificates     | $ | 2,094                  
|Passbook Savings | $ | 572                    
|                 |   |                        
|                 | $ | 2,666                  

The Association held deposits of approximately $653,000 and
$575,000 for officers and directors at December 31, 2000 and 1999,
respectively.



NOTE K

ADVANCES FROM FEDERAL HOME LOAN BANK

Pursuant to collateral agreements with the Federal Home Loan
Bank (FHLB), advances are secured by a blanket floating lien on
first mortgage loans. Total interest expense recognized in 2000,
1999 and 1998, respectively, was $3,209,000, $2,674,000 and $1,616,000.





|Contract Rate  | Advance Total
|-------------- | -------------
|               |              
|4.00% to 4.99% | $            
|5.00% to 5.99% |              
|6.00% to 6.99% |              
|7.00% to 7.99% |              
|               | $            
|               |              



Maturities of Advances at December 31, 2000 for each of the
next five years are as follows (in thousands):



|Year Ending  |   |       
|------------ | - | ------
|December 31, |   | Amount
|2001         | $ | 19,318
|2002         |   | 7,828 
|2003         |   | 8,329 
|2004         |   | -     
|2005         |   | 6,709 
|Thereafter   |   | 12,007
|             | $ | 54,191

NOTE L

INCOME TAX EXPENSE

The provision for income taxes for 2000, 1999 and 1998 consists
of the following (in thousands):



|                     |   | Years EndedDecember 31,
|-------------------- | - | -----------------------
|                     |   | 2000                   
|Current Tax Expense  | $ | 603                    
|Deferred Tax Expense | $ | 63                     
|                     |   |                        
|                     | $ | 666                    

The provision for Federal income taxes differs from that computed
by applying Federal statutory rates to income (loss) before Federal
income tax expense, as indicated in the following analysis (in
thousands):



|                                     |   | Years EndedDecember 31,
|------------------------------------ | - | -----------------------
|                                     |   | 2000                   
|Expected Tax Provision at a 34% Rate | $ | 633                    
|Expected State Corporate Tax         |   | 9                      
|Effect of Tax Exempt Income          |   | (5)                    
|Employee Stock Ownership Plan        |   | 20                     
|Other                                |   | 9                      
|                                     | $ | 666                    

Deferred tax liabilities have been provided for the temporary
differences related to unrealized gains on available-for-sale
securities, deferred loan costs, depreciation, and non-cash Federal
Home Loan Bank dividends. Deferred tax assets have been provided
for the temporary differences related to the Companys Recognition
and Retention Plan and Employee Stock Ownership Plan, unrealized
losses on available-for-sale securities, the allowance for loan
losses, reserves for uncollected interest and late charges, deferred
loan fees, and the allowance for losses on foreclosed real estate.
The net deferred tax assets or liabilities in the accompanying
statements of financial condition include the following components
(in thousands):



|                    |                                |                               | 2000 |   | 1999
|------------------- | ------------------------------ | ----------------------------- | ---- | - | ----
|Deferred Tax Assets |                                |                               |      |  
|                    | Recognition and Retention Plan | $                             | 13   | $ | 13  
|                    | Employee Stock Ownership Plan  |                               | 80   |   | 65  
|                    | Market Value Adjustment to     |                               |      |   |     
|                    |                                | Available-for-Sale Securities |      | - |     
|                    | Other                          |                               | 9    |   | 4   
|                    | Total Deferred Tax Assets      |                               | 102  |   | 381 

|                                                      |                                |                               | 2000  |      | 1999
|----------------------------------------------------- | ------------------------------ | ----------------------------- | ----- | ---- | ----
|Deferred Tax Liabilities                              |                                |                               |       |     
|                                                      | FHLB Stock Dividends           | $                             | 235   | $    | 154 
|                                                      | Market Value Adjustment to     |                               |       |      |     
|                                                      |                                | Available-for-Sale Securities |       | 666  |     
|                                                      | Allowance for Loan Losses      |                               | 187   |      | 191 
|                                                      | Other                          |                               | 58    |      | 53  
|                                                      | Total Deferred Tax Liabilities |                               | 1,146 |      | 398 
|                                                      |                                |                               |       |      |     
|Deferred Tax Liabilities - Net of Deferred Tax Assets | $                              | 1,044                         | $     | 17  
|                                                      |                                | ====                          |       | ====

Included in retained earnings at December 31, 2000 and 1999
is approximately $3,800,000 in bad debt reserves for which no
deferred Federal income tax liability has been recorded. These
amounts represent allocations of income to bad debt deductions
for tax purposes only. Reduction of these reserves for purposes
other than tax bad-debt losses or adjustments arising from carryback
of net operating losses would create income for tax purposes,
which would be subject to the then-current corporate income tax
rate. The unrecorded deferred liability on these amounts was approximately
$1,292,000 for December 31, 2000 and 1999, respectively.



NOTE M

EMPLOYEE STOCK OWNERSHIP PLAN

During 1997, GS Financial Corp. instituted an employee stock
ownership plan (the "ESOP") that covers all employees
of Guaranty Savings and Homestead Association who have completed
one year of service and have attained the age of 21. The ESOP
purchased the statutory limit of eight percent of the shares offered
in the initial public offering of the Company (275,080 shares).
This purchase was facilitated by a loan from the Company to the
ESOP in the amount of $2,750,800. The loan is secured by a pledge
of the ESOP shares. The shares pledged as collateral are reported
as unearned ESOP shares in the balance sheets. The corresponding
note is to be paid back in 40 equal quarterly payments of $103,000
on the last business day of each quarter, beginning June 30, 1997
at the rate of 8.5%. The note payable and the corresponding note
receivable have been eliminated for consolidation purposes.

The Association may contribute to the plan, in the form of
debt service, at the discretion of its board of directors. Dividends
received on ESOP shares are either utilized to service the debt
or credited to participant accounts at the discretion of the trustees
of the Plan. Shares are released for allocation to plan participants
based on principal and interest payments of the note. Compensation
expense is recognized based on the number of shares allocated
to plan participants and the average market price of the stock
for the current year. Released ESOP shares become outstanding
for earnings per share computations.

As compensation expense is incurred, the Unearned ESOP Shares
account is reduced based on the original cost of the stock. The
difference between the cost and average market price of shares
released for allocation is applied to Additional Paid-in Capital.
ESOP compensation expense was approximately $377,000, $355,000
and $521,000 for the years ended December 31, 2000, 1999 and 1998,
respectively.

The ESOP shares as of December 31, 2000 and 1999 were
as follows:



|                                               |   | 2000    |   | 1999   
|---------------------------------------------- | - | ------- | - | -------
|Allocated Shares                               |   | 78,215  |   | 52,268 
|Shares Released for Allocation                 |   | 28,132  |   | 28,132 
|Unreleased Shares                              |   | 164,583 |   | 192,715
|                                               |   |         |   |        
|Total ESOP Shares                              |   | 270,930 |   | 273,115
|                                               |   | ======  |   | ====== 
|Fair Value of Unreleased Shares (in thousands) | $ | 2,397   | $ | 2,361  
|                                               |   | ====    |   | ====   

Total ESOP shares decreased in 2000 and 1999 due to the liquidation
of shares for employees who terminated their employment in 2000
and 1999.





NOTE N

RECOGNITION AND RETENTION PLAN

On October 15, 1997, the Company established a Recognition
and Retention Plan (the "Plan") as an incentive to retain
personnel of experience and ability in key positions. The Company
approved a total of 137,540 shares of stock to be acquired for
the Plan, of which 125,028 shares have been allocated for distribution
to key employees and directors. As shares are acquired for the
Plan, the purchase price of these shares is recorded as unearned
compensation, a contra equity account. As the shares are distributed,
the contra equity account is reduced.

During 1998, by unanimous approval of the Plan participants,
the Plan was amended as a direct effort to reduce the Companys
expenses resulting from the Plan. Prior to the amendment to the
Plan, Plan share awards were earned by recipients at a rate of
20% of the aggregate number of shares covered by the Plan over
five years. The amended Plan stipulates that Plan share awards
are earned by recipients at a rate of 10% of the aggregate number
of shares covered by the plan over ten years. If the employment
of an employee or service as a non-employee director is terminated
prior to the tenth anniversary of the date of grant of Plan share
award for any reason (except for death, disability or retirement),
the recipient shall forfeit the right to any shares subject to
the award which have not been earned.

The total cost associated with the Plan is based on a per share
value of $12.50, the market price of the Companys stock
as of the date on which the Plan was amended. This cost is being
amortized over ten years. Compensation expense pertaining to the
Recognition and Retention plan was $156,000, $156,000 and $103,000
for the years ended December 31, 2000, 1999 and 1998, respectively.



A summary of the changes in restricted stock follows:



|                             | UnawardedShares | AwardedShares
|---------------------------- | --------------- | -------------
|Balance at January 1, 1999   | 12,472          | 112,529      
|Purchased by Plan            | -               | -            
|Granted                      | -               | -            
|Forfeited                    | -               | -            
|Earned and Issued            | -               | (12,501)     
|                             |                 |              
|Balance at December 31, 1999 | 12,472          | 100,028      
|Purchased by Plan            | -               | -            
|Granted                      | -               | -            
|Forfeited                    | -               | -            
|Earned and Issued            | -               | (12,506)     
|                             |                 |              
|Balance at December 31, 2000 | 12,472          | 87,522       
|                             | =====           | =====